Friday, July 10, 2009

Godrej to merge consumer goods biz

The Godrej Group is on a drive to consolidate its consumer goods business to cut costs and push efficiencies across its three consumer product companies. The move will bring about synergies within the group’s flagship FMCG company, Godrej Consumer Products (GCPL) and two of its joint ventures — Godrej Sara Lee (GSL) and Godrej Hershey’s (GHL).

The group is looking to consolidate on three different levels. First, on the distribution front — all the three businesses will sell as one entity, starting this month to modern trade. “We will be selling as a single entity to modern trade, which will be Godrej from now on. This will ensure the advantage of scale and give us better margins,” GCPL managing director Dalip Sehgal said.

The group is also going to consolidate its supply chain, which will result in a common warehouse for all its consumer product companies. This will mean lesser operational costs for the group. Besides, distribution and supply chain, the company will also bring together its businesses focussed on the rural market. “If we synergise all our businesses, we will be able to get bigger volumes in the rural market,” added Mr Sehgal.

Currently, 38% of its sales come from the rural market, but the company expects that to go up to 50% in the next three years. “We are increasing our distribution reach in villages by increasing the number of stockists and sub-stockists,” said Mr Sehgal.

To rev up the FMCG business, the group had set up an FMCG cell to focus on growth and leverage from synergies across the three consumer goods companies. In another move to consolidate operations, GCPL merged two group entities — Godrej Consumer Biz and Godrej Hygiene Care — with itself. Following this, GCPL holds 49% stake in GSL.